Japan tax change may benefit firms, currency

Discussion in 'Forex' started by ASusilovic, Apr 2, 2009.

  1. HONG KONG (MarketWatch) -- The Japanese government recently approved a tax exemption for dividends paid by overseas units of Japanese firms and some analysts expect it to be a boon for major firms as well as provide support to the nation's currency.
    Under the new legislation, which was implemented Wednesday, dividends received from overseas affiliates of Japanese corporations will be exempted from Japanese corporate tax.
    "The introduction of Japanese HIA could prove [yen] positive towards the end of Q2," said Tohru Sasaki, chief foreign-exchange strategist at J.P. Morgan Chase in Tokyo, wrote in a recent note to clients.

    The principles of Japanese HIA are the same as those of the U.S. Homeland Investment Act in 2005, which "gave tax breaks for U.S. companies in the form of reduced taxation on their repatriated foreign earnings," he said.
    Sasaki points out that as a result of the U.S. HIA, the U.S. dollar saw a significant boost.

    On Thursday, the U.S. dollar was recently down slightly at 98.54 yen in Asia, as compared with 98.83 yen in late in New York.

    Sasaki said he expects around 3 trillion to 4 trillion yen ($30.4 billion to $40.6 billion) to be repatriated in "relatively limited duration and this could have a meaningful impact" on the yen.


    Yes, 49 % export plunge has a "meaningful" impact on yen....:eek: